Editorial | Chan faces challenge of budget balancing act to help recovery

Managing expectations ahead of the annual budget has always been part of the challenge for Financial Secretary Paul Chan Mo-po. So far he appears to have talked the public out of generous handouts amid a ballooning deficit. But the job is only half done. Juggling a sluggish economy with mega infrastructure spending and massive livelihood improvement programmes will put the veteran minister to the toughest of tests when he tables his second post-Covid recovery budget on Wednesday.

The city was barely out of the coronavirus crisis when Chan tabled his first fiscal blueprint for the new government this time last year. While life has largely returned to normal and the economy has picked up, it does not necessarily make this year’s budget easier. Externally, geopolitical tensions and economic headwinds have limited the room he has to manoeuvre. Internally, the multibillion-dollar deficit is continuing to spiral as public revenues fall short of forecasts. Many industries are still being held back by a severe manpower crunch. Adding to the pressure are a sagging property market and a weaker-than-expected rebound in tourism and consumption. The road to full recovery remains a long one.

It is yet to be seen whether Beijing will announce further boosts to the economy during the ongoing inspection tour by Xia Baolong, director of the Hong Kong and Macau Affairs Office. However, it is good that the individual travel scheme to the city is being expanded to cover Xian and Qingdao. Xia is also said to have received reassurances on the city government’s financial health after being briefed by Chan and others. “He encouraged us to continue to strive to do a better job and better leverage Hong Kong’s unique functions and status in the country’s development,” Chan said.

The government, to its credit, has stepped up efforts on various fronts, such as recruiting overseas talents and investments as well as staging more mega events and carnivals to help lift the economy. But economic indicators show the outcome still leaves much to be desired. The pace and the scale of such measures should be further enhanced to achieve more significant results.

There are also calls to drop anti-speculation measures in an attempt to revive the property market, and to rein in public spending by limiting welfare subsidies and targeting recipients. While the government has to address these concerns, a healthy and affordable housing market remains a long-term goal. Likewise, the pros and cons of any welfare cuts must be carefully weighed to ensure the needy are protected while financial discipline is maintained. Chan must rise to the challenge and show he can bring Hong Kong out of its current predicament.